Budget 2026 signals a deeper shift: a deliberate move to own the core building blocks of the digital economy.
India, long known as a major consumer and exporter of technology services, now aims to build and own critical digital infrastructure. While Budget 2026 did not feature dramatic slogans, its technology initiatives signal a significant strategic shift. The government is moving beyond supporting IT services and digital adoption to establishing control over the foundational layers of the digital economy: semiconductors, cloud infrastructure, AI platforms, and high-value manufacturing.
This transition is important because countries that control these layers shape innovation, security, and economic power.
From Services-Led Growth to Technology Sovereignty
For three decades, India’s technology growth has centered on software services, global delivery, and cost efficiency. While this created jobs and scale, it also left India dependent on other countries for hardware, chips, cloud, and advanced computing.
Budget 2026 acknowledges this gap and shifts the focus to building domestic capabilities in areas previously imported or dominated by a few global players.
Central to this shift is the launch of India Semiconductor Mission (ISM) 2.0, which broadens the focus from fabrication plants to the entire semiconductor value chain: design, materials, equipment, packaging, and intellectual property. This distinction is crucial, as fabrication alone does not ensure independence without ownership of tools, materials, and IP. The intent is clear: reduce vulnerability to global supply shocks and position India as a credible participant in the global chip ecosystem.
Strengthening the Electronics Backbone
In addition to semiconductors, the Electronics Components Manufacturing Scheme (ECMS) is expanding. India now prioritizes local production of key components such as PCBs, sensors, power modules, and connectors, rather than only assembling finished products.
This matters because components capture far more value than This shift is significant because components capture more value than assembly and anchor supply chains. Local production enables manufacturers to achieve better cost control, faster time-to-market, and greater resilience during disruptions. assembly hub into a deep manufacturing ecosystem, similar to what East Asian economies achieved over previous decades.
Cloud Tax Holiday: A Long-Term Bet on Compute
A key announcement is the proposed tax holiday for global cloud service providers operating through Indian partners, extending until 2045.
This move is designed to attract large-scale investments in data centers and high-performance computing infrastructure. In practical terms, it lowers the cost of building and operating cloud and AI infrastructure in India, making the country one of the most attractive destinations globally for hyperscalers.
The expected impact is substantial:
- Cheaper computing for Indian enterprises and startups
- Faster AI adoption across industries
- Expansion of Global Capability Centers (GCCs) focused on AI and product engineering
Cloud is now positioned as national digital infrastructure, rather than merely an IT utility.
AI as Public Infrastructure
Budget 2026 also marks a shift in the government’s approach to artificial intelligence. AI is now viewed as an operational tool for large systems, not just an experimental technology.
For example, the proposal to build a Customs Integrated System using advanced imaging and AI for non-intrusive scanning and risk assessment demonstrates this shift. Similar initiatives are underway in defense, manufacturing, and public services.
This approach creates a strong domestic market for scalable, secure, and compliant AI platforms, and encourages private companies to develop enterprise-grade solutions rather than consumer-only applications.
Building the Talent Pipeline for a New Economy
Another forward-looking initiative is the plan to establish AVGC (Animation, Visual Effects, Gaming, and Comics) Content Creator Labs in 15,000 secondary schools and 500 colleges.
The objective is not merely to produce social media creators, but to build a workforce capable of developing games, immersive experiences, and digital IP. As global demand for interactive and immersive content grows, India is well positioned to become an exporter of creative technology and intellectual property.
The Bigger Picture
Collectively, these measures form a coherent strategy:
- Own the hardware layer (chips and components)
- Own the compute layer (cloud and data centers)
- Embed AI into national systems
- Build talent for high-value digital creation
Budget 2026 addresses a critical question: who will control the foundations of the digital economy?